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It's straightforward, and that's how everyone reports. Hardware revenue was down, and the primary cause was the drop in 360 shipments. Bone revenue was also down  despite shipments being up  but not as much as 360 revenue dropped; in absolute dollars, not relatively. Both were down, and 360 was down more, in dollars.

Sony's report is the same. Hardware revenues are up thanks primarily to an increase in PS4 shipments  and despite an unnoted price drop  and further assistance from exchange rates and stuff. Also of note, but of least consequence, was a drop in PS3 revenue caused by lower shipments.

Banned

I think the miscommunication might stem from the fact (if I understand where each of you stand) that snyder is talking about Xbox as a platform (hardware), whereas you take the MS pov and talk about Xbox as a platform-agnostic service, which is pretty much the sleigh of hand that MS has been performing with the MAU reporting, as Win 10 installs are de facto Xbox Live users if I understand correctly (which would also explain the sudden jump from 37 to 48M imho), given that Win10 comes with a pre-installed Xbox Live App.

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It's straightforward, and that's how everyone reports. Hardware revenue was down, and the primary cause was the drop in 360 shipments. Bone revenue was also down  despite shipments being up  but not as much as 360 revenue dropped; in absolute dollars, not relatively. Both were down, and 360 was down more, in dollars.

Sony's report is the same. Hardware revenues are up thanks primarily to an increase in PS4 shipments  and despite an unnoted price drop  and further assistance from exchange rates and stuff. Also of note, but of least consequence, was a drop in PS3 revenue caused by lower shipments.

Nothing objectionable about it. You have to know what exactly happened before you can start trying to explain why it happened. This is just the what. It's up to management to try to figure out why and what to do about it.

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Nothing objectionable about it. You have to know what exactly happened before you can start trying to explain why it happened. This is just the what. It's up to management to try to figure out why and what to do about it.

Just to add to this a bit, we do get some of the why  revenues were down because shipments dropped  but yeah, then it's left to us to figure out why shipments are down, and where that money is being spent instead.

It's natural for your old product to generate less interest as more people see it as, well, old, and indeed, both MS and Sony saw shipments of their old product drop. However, the hope is that the reason people are less interested in your old product is because the new one is so much more compelling. So the drop in spending on your old product should at least be balanced by the spending on your new product, and ideally, your new product will simply be more appealing than your old product, attracting still more spending, and you'd see an overall increase in the money being spent on them. That's what's happening at Sony.

But things aren't quite so rosy at MS. Less money is being spent on buying 360s, but not only is that not being balanced by an increase in Bone spending, spending on Bone actually decreased YoY. So not only is the money being spent on buying in to the platform down overall, it's even down with the newer, presumably more attractive product; the one meant to be luring folks in. Interest in buying in to the ecosystem is down overall, but more importantly, it's down where it should be up.

And yes, while unit volume is important in its own right for various reasons, consumer interest and general business success is measured in terms of spending. A company that convinces one person to spend $1,000,000 on a car is considered more successful than a company who gets five people to pay $20,000 for one, especially if the million-dollar car generates more profit. Collectively, there's a finite amount of money consumers are willing to spend on a given product or service in a given period, so we look at how much of that money goes where.

So PlayStation is attracting more buy-in interest than it did last year, specifically in the new hotness, where it belongs. Buy-in interest in XBox is down, even in the new hotness. Having interest in a console drop in its third holiday isn't a very good sign; peaking your second Christmas doesn't speak well to long term viability.

So investors look at XBox hardware revenue and think, "/nod No wonder they're moving away from this business. Windows and mobile will have better margins anyway, so I'll buy a few more shares."

And yes, not reporting the hardware units tells us MS are moving away from that business, not that they're sad because Sony is winning. I'll include this here:

People keep saying this, but it doesn't make a lot of sense. For example, Live MAU has hit 48M, but PSN MAU was 64M a year ago, so how is that a favorable comparison for MS, especially when the Live numbers are heavily bolstered by W10 users? (Already ~20M coming out of September.)

Meanwhile, Nintendo continue to report their hardware numbers, and supposedly they're even worse than Microsoft's. Even though Apple sold 74.8M iPhones last quarter, MS had no trouble telling us they sold only 4.5M Lumias in the same period, just 1.1% of the smartphone market.

It's almost like rather than simply being ashamed of their poor performance, they're trying to tell their investors about the stuff that does matter to MS, no matter how poorly it's doing. Nah, that can't be it.

MS stopped reporting XBox shipments for the same reason Sony stopped reporting PS3 and Vita shipments; moving forward, they no longer consider it relevant to their business. They haven't abandoned those products, so they still get mentioned when they have a meaningful effect on revenues, but it's no longer a point of focus for the company, so it needn't be a point of focus for investors. Lumia sales are important, but console sales we're past that now.

Banned

MS stopped reporting XBox shipments for the same reason Sony stopped reporting PS3 and Vita shipments; moving forward, they no longer consider it relevant to their business. They haven't abandoned those products, so they still get mentioned when they have a meaningful effect on revenues, but it's no longer a point of focus for the company, so it needn't be a point of focus for investors. Lumia sales are important, but console sales we're past that now.

That's reasonable when the PS4 is here and PS3 and PS Vita are at the end of it's life cycle. But it's not reasonable when MS stopped reporting Xbone shipments in it's 2nd year of it's life cycle. Why MS still producing Xbone when it's not a point of focus for the company anyway? Just for more XBL numbers probably.

Unfortunately, you typically don't get to decide when a product&#8217;s life cycle will end, nor is there any guarantee about how long that will last. While it&#8217;s not what you&#8217;d expect/hope for a console, if Bone sales peaked 13 months after it launched, then that&#8217;s that, and it&#8217;s unlikely to re-peak once it does. People will likely continue to spend less and less money overall to buy in to Bone, and you can guess at the rate of decline based on how long it took for them to peak. If a console typically peaks in its third or fourth holiday and Bone peaked in its second, it&#8217;s not likely to live as long as a typical console might.

Yes, they sold more units, and that&#8217;s good, but when someone wants to know why you earned less money, pointing out that you did more work in the process doesn&#8217;t really strengthen your case. Making your product more attractive by lowering the price should attract more of the dollars being spent, not less. Sony lowered their buy-in price by 12.5%, and had limited stock at 25% off, and their unit sales increased more than 30%, increasing their overall revenue. That&#8217;s how you&#8217;d expect a console to be performing in its third holiday, but it seems Bone already peaked last year, at least in terms of dollars-attracted, and units-sold will certainly peak not long after.

Why MS still producing Xbone when it's not a point of focus for the company anyway? Just for more XBL numbers probably.

For the same reasons Sony continue to produce the PS3. First, if there are still people willing to pay you for it, there&#8217;s no reason to refuse their money. More to the point though, it&#8217;s about maintaining brand loyalty.

Like I said, the idea is to transition your customers from your old product to your new product, and, &#8220;Fuck you, now you&#8217;ll buy our new thing,&#8221; doesn&#8217;t typically engender a lot of good will. Better to continue supporting your legacy product until it dies a natural death.

Sony support the PS3 because the hope is those users will be satisfied with their experience, predisposing them to buy the PS4 when they&#8217;re looking to upgrade their experience, whenever that may be. Similarly, MS continue to support the Bone in the hopes that those customers can be transitioned to their new offerings, but rather than the comparatively simple transition of, &#8220;The same, but better,&#8221; that Sony ask of their users, MS are faced with the considerably more difficult task of turning console gamers in to mobile and/or PC gamers. They&#8217;ll lose a sizable fraction of those console users in the process, but Windows &#8212; and hopefully mobile &#8212; dwarfs anything they&#8217;ve ever done in the console space, so the real concern for them is that the general public continues to think, &#8220;XBox means games,&#8221; rather than, &#8220;XBox will fuck you over as soon as it's more convenient to do so.&#8221; Even if they lose 90% of their console users, they don't want them saying anything worse than, "It's good; it's just not for me," to everyone else. Certainly not, "If you're gonna game on PC, support Steam and Linux, because MS are just here to rob you."

Ceasing to report unit sales doesn't necessarily mean they've put it down. It just indicates to their shareholders that it's been put out to pasture. "No extraordinary measures," etc. MS have told their shareholders they aren't focused on growing or even necessarily sustaining their console business, but it still has use for them, as a source of consumer goodwill. That's what Nadella explained when he took over; XBox has value to MS, but he conspicuously said nothing about consoles having value to them. On the contrary, he explicitly said the brand was worth keeping for their other products.

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Thank you serversurfer & CosmicQueso for feedback and some more corporate viewpoint on the corporate statement. It's always interesting reads you are providing and I guess people would spend/ do spend money for getting these kind of service in the non-Gaf world. here it's free and that's nice. So keep up spitting out walls of text. We like them.

I guess you are right that Nadella will keep the brand but kick the box, or at least transform it. Xbox should become the equivalent to Steam. A service. Xboxbox should become the Steam machine or Apple TV, an appendix to the core business. Everything running on Win10, connecting phones, tablets, PCs and so on.
Maybe they could market it as something like an all in one entertainment system. That would be quite fitting and a cool catchphrase.

So, I understand the plan serversurfer is rolling out for Microsoft and it's very likely to happen. The writing is 10 feet high on the wall. And it totally makes sense for MS.

I know that corporations can include and leave out the stuff they want into the reports (as long as they are not lying). So MS did nothing wrong. But I am sure if XboxOne would do better they would have given it a bullet point on it's own. Now they mixed it all up into some Xbox family, to direct the focus on the 360 decline instead of the XboxOne stagnation.
Fine with me, but saddening nonetheless that they mention:

Member

Thank you serversurfer & CosmicQueso for feedback and some more corporate viewpoint on the corporate statement. It's always interesting reads you are providing and I guess people would spend/ do spend money for getting these kind of service in the non-Gaf world. here it's free and that's nice. So keep up spitting out walls of text. We like them.

I guess you are right that Nadella will keep the brand but kick the box, or at least transform it. Xbox should become the equivalent to Steam. A service. Xboxbox should become the Steam machine or Apple TV, an appendix to the core business. Everything running on Win10, connecting phones, tablets, PCs and so on.

XBox (Live) kinda of already is the equivalent of Steam. Steam+, perhaps, given that I'm not sure what sort of perks Steam provides; Live is already available on more device types, for example (AKAIK). But yeah, XBox will be positioned as an alternative to stuff like Steam, GameCenter, etc.

I think they'll certainly have an AppleTV, and I could maybe additionally see a Steam Machine if Phil is successful in transitioning his existing AAA teams to PC development. If he can't, they'll just stick with mobile gaming and the Apple XBox TV.

Maybe they could market it as something like an all in one entertainment system. That would be quite fitting and a cool catchphrase.

I know that corporations can include and leave out the stuff they want into the reports (as long as they are not lying). So MS did nothing wrong. But I am sure if XboxOne would do better they would have given it a bullet point on it's own. Now they mixed it all up into some Xbox family, to direct the focus on the 360 decline instead of the XboxOne stagnation.

I'm not really sure what you mean here. I'm referring to this quote:"Xbox hardware revenue decreased 9%, mainly due to a decline in Xbox 360 console volume. Xbox One revenue decreased slightly, due to higher console volume, offset by lower prices of consoles sold."

That says exactly what it's supposed to say. Hardware revenues were down 9%. The main cause of that was the lower 360 shipments, but the fact that they collected less money for Bones despite passing out more of them didn't help matters either. They're not "hiding Bone's stagnation;" it's change just had a smaller effect on the revenue that 360's change did. Maybe they shipped 500k fewer 360s, earning them $100M less. Maybe Bone shipments went from 2M to 2.1M, but instead of collecting $600M like they did last year, they only got $550M. So the drop in Bone revenue may be the "bigger news," but it had the smaller effect on their revenue, and you basically list things in order of influence.

But again, these reports are disclosure, not PR. They exist to inform you of what's not on, not to try to make you feel good about it. Yes, the stagnant Bone sales are a "serious problem," but MS aren't hiding that fact at all. On the contrary, they told us that explicitly a few quarters ago when they stopped reporting them at all. They don't do that because it's performing poorly &#8212; they report their tiny Lumia sales &#8212; they do it because it's no longer considered a vital business interest. Likely because of its stagnant performance, yes, but the change in reporting tells they ain't really trying' to fix it. Like the PS3 and Vita, it's considered a legacy product now.

Edit: Basically, the only reason consoles are discussed at all is because they need to be documented as a source of income, just like income from stock dividends, heroin sales, or whatever. If some of your income goes up or down &#8212; regardless of the source &#8212; you gotta say why. Additionally, you're expected to report on the state of your primary business interests, like Lumia unit sales, or Live MAU, or whatever.

Neo Member

I know no Nintendo love showing but most of the games seem to be either sports games or shooters. I typically see games like that selling to people who buy the 60$ expansion or people who get it because them and their friends have been since they came out. On that list I have only ever played minecraft with friends... Guess more niche games don't sell.

Member

I can definitely see a future scenario where xbox is a brand instead of a console. I think ms realizes they will always have trouble penetrating territories beyond us and UK with the xbox console brand. Windows doesn't have this issue.

Having said that, I don't believe we will see the end of the xbox hardware brand. Just a transition of what it is. The next xbox console will be just one way to get into the xbox ecosphere beyond PC and I guess mobile. Though they seem to be struggling more in mobile than xbox.

Of course maybe ms needs to redefine what a set top box is. Perhaps the next xbox isn't just a console but a lower cost windows PC that can also play xbox games. This would probably give the device more appeal worldwide. As well as valve is doing with steam I think the steam machines are dropping the ball.

Definitely be fascinating to see what ms does next. I don't think they can pump out another traditional console and increase market share.

Member

I just commented on the sheets Conduit posted. I am aware that these 3 images aren't the whole report, it just baffled me that XboxOne is not mentioned under the gaming highlights bulletpoint, but XboxLife, Halo, Minecraft and 360 are. I mean, gaming highlights, and you don't even name-drop your this-gen console?
Just found it remarkable.

Member

I just commented on the sheets Conduit posted. I am aware that these 3 images aren't the whole report, it just baffled me that XboxOne is not mentioned under the gaming highlights bulletpoint, but XboxLife, Halo, Minecraft and 360 are. I mean, gaming highlights, and you don't even name-drop your this-gen console?
Just found it remarkable.

So, I think we might have talked about different documents, but that's fine. Can happen.

Oh, I see what you mean. The last slide gives the highlights of everything that happened in the gaming segment, while the bit I quoted focuses specifically on hardware, so it goes in to a little more detail. It's really not them trying to hide things so much as the drop in Bone revenue just being one of the least significant changes in the entire Gaming segment. The change in Bone's unit sales themselves was only significant in the context of them earning less despite having moved more product. "We sold a bit more, but had to charge a good bit less to do it, so income was down." But like I said, that change  whatever the actual amount  had the smallest effect on their revenue for the quarter, so it just gets mentioned last, if at all. Maybe they took in a billion dollars less on Bone hardware, but that wouldn't matter so much if everything else was fluctuating by tens of billions. Obviously, it wasn't a billion dollar shift, but the point is they just order stuff by how much effect it had on their bottom line. That's as specific as they're required to be, basically.

The "this is due to 360 dropping" reason is starting to get a bit silly.
I mean almost 2 years ago we were already hearing that the 360 counted for nothing (when they started adding up XB1+360 shipments) so I'm not sure how much more it can drop to be able to contantly offset the supposed good XB1 perf, especially with a much lower price.

Member

The "this is due to 360 dropping" reason is starting to get a bit silly.
I mean almost 2 years ago we were already hearing that the 360 counted for nothing (when they started adding up XB1+360 shipments) so I'm not sure how much more it can drop to be able to contantly offset the supposed good XB1 perf, especially with a much lower price.

Member

I don't think it's completely unreasonable. If you assume a $175 ASP for 360, it wouldn't hard to outweigh a $25 change in Bone ASP, for example. It was already pretty cheap last year, so its price won't have dropped much.

Also, maybe a 10% price cut boosted Bone shipments by 5%, lowering revenue by only 5.5%, which would be that much easier for 360 to outweigh.

You'll need a sharp drop to result in a 9% (and 17% before that) drop in revenue coming purely from an item that is half the price. That doesn't line up with the fact that the 360 has presumable sold fuck all since 2 years ago already.

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You'll need a sharp drop to result in a 9% (and 17% before that) drop in revenue coming purely from an item that is half the price. That doesn't line up with the fact that the 360 has presumable sold fuck all since 2 years ago already.

The 17% drop was YoY in Jul-Sep '15, I assume? When did their hardware revenue start dropping overall? Is calendar 4Q15 the first time they've specifically mentioned a drop in Bone revenue?

Regardless, could be that 360 made up 4.6% of the drop and Bone made up the other 4.4%. Like I said, we have no idea how much Bone revenue actually dropped; only that it was down some amount, and shipments were up. While their press releases are masterclasses in doublespeak, I really don't think MS are fudging their financials. Consoles aren't even particularly relevant to their business anymore  they stopped reporting them  so why obfuscate?

This I agree with. And as I was saying in the other thread, whether the real split is 1.99:1 or 2.01:1, as far as publishers like Ubi are concerned, it's effectively 2.25:1. However many Bone owners there actually are, they have the same buying power as approximately 16M PS4 owners. (Based on the share Ubi saw Jul-Sep '15; they haven't posted Oct-Dec '15 yet.)

Member

Answered my own question. Bone revenues have actually been down YoY since at least calendar 1Q15, and maybe since 4Q14, depending on what this means:

"Xbox Platform revenue decreased $703 million or 20%, driven by a 10% decline in total console volume, the transition from Xbox 360 to Xbox One with lower prices compared to the prior year, and lower revenue from second- and third-party video games and accessories."

That middle bit kinda makes it sound like last holiday ('14) was the same as this holiday ('15); sold more units, but collected less money in the process.

Seems like it. Kinda crazy that Bone's best revenue may have come in the launch quarter. Of course, they launched 3.9M at $500 a pop, which is just shy of $2B. They'd need to ship almost 5.4M at $365 to best that, and they only shipped 6.6M XBoxen total for the quarter, so I guess maybe it's not really that crazy.